Sodexo S.A. (SW) Earnings Call Transcript & Summary

Hello, and welcome to our Investor Day. Thanks so much for being with us. My name is Dianne Salt, and I'm the Chief Communications Officer and a member of Sodexo's Executive Committee. I have the pleasure of being your emcee for days broadcast. Welcome back to those of you who were with us 2 years ago, and welcome to those who are joining us for the first time. Obviously, with COVID, we're not able to host this event in person, but it's great that so many of you could be with us here virtually. Because our speakers are connecting from wherever they're based, there may be moments when you experience a slight delay. Please bear with us and the technology. We're doing our best to make this a dynamic experience. As you can see, we're not wearing masks. This is so that we can engage with you in a more personal way. But rest assured, we have all the necessary safety protocols in place here at the studio, including the appropriate social distancing. This Investor Day is being recorded for those who are unable to attend. The recording will be posted on our website shortly after the broadcast. I'd like to start off by introducing our CEO, Denis Machuel, who is here with me.

Hi, Dianne. Hello, everyone.

We have a packed agenda for you, and we've worked hard to try to make this a worthy investment of your time. We intend to finish promptly at 5:30 p.m. Paris time. Today, you'll hear from a number of our executives. We also have some great videos and client testimonials to share with you as well. Now some of these visuals we're using today were captured before COVID hit. So you'll see a mix of people with and without masks as well as varying degrees of social distancing. We'll also have 4 Q&A session, one after each set of speakers. [Operator Instructions] However, as there is a lag between the webcast and the call, we strongly recommend participating in the meeting for the webcast until the Q&A sessions begin. So Denis will kick things off momentarily with an update on what we've accomplished since our last Investor Day. After that, you'll hear from Cathy Desquesses, our Chief People Officer; and Marc Rolland, our CFO, on our human-centric and our cash-generative business model. After that, Denis will then present his perspectives on what comes next, followed by a Q&A session with Marc and Cathy. We'll then hear about some of the major trends we're seeing in our markets from Sylvia Metayer, our Chief Growth Officer; François Blanckaert, our Chief Procurement Officer; and Bruno Vanhaelst, our Chief Sales and Marketing Officer, who will be connecting with us from the U.S. This will be followed by another Q&A session. After that, we'll have a short break before the second part of the broadcast. After the break, you'll hear more about how we're responding to some major trends in our business, particularly in Corporate Services from 3 of our global Executive Committee members, namely Sunil Nayak, our Corporate Services CEO Worldwide, who will be connecting from London; Aurélien Sonet, our CEO Benefits & Rewards Services Worldwide; and Sarosh Mistry, our Region Chair for North America, who will connect from the U.S. Their remarks will be followed by Q&A. After that, we'll end the day with Denis' wrap-up and a final Q&A with both Denis and Marc. So let's get started. As in all Sodexo meetings, we'll begin with a safety moment, and this one is from our team in APAC. [Presentation]

I hope you enjoyed that video showcasing some of the exceptional work our teams are doing in today's new COVID context, create a safe environment. Now without further delay, it's my pleasure to pass the floor to Denis.

Thanks, Dianne, and hello, everyone. Welcome to our Virtual Investor Day. Thanks for being with us. While a virtual gathering can never replace an in-person meeting, we felt it was important for us to have this update, and I want to thank you for being here. In this time together, we'll share with you how Sodexo is navigating through 2020 and what we can see for the future. No one has been spared the tsunami that is COVID. And as the American academic Jon Kabat-Zinn says, "You can't stop the waves, but you can learn to surf." The story we want to share with you today is about how we're facing these big peaks and troughs, how we are investing and preparing for long-term growth. Sodexo is resilient. We're going to tell you about how our clients increasingly need and want integration of services. Our integrated model at the heart of our DNA has been a key stabilizer in the crisis and gives us confidence in our horizon. Also in our DNA the Bellon family's control provides essential stability and independence and protects a culture that is unique. Today, we will showcase our progress since the 2018 Capital Markets Day. And in particular, I want to start with how we tackled the deep executional issues that we had. So what have we done over the past 3 years? With a strongly renewed Executive Committee, I have reboosted the business. We have worked with one single overarching goal: to execute our focus on growth agenda, specifically concentrating on addressing areas of underperformance. And here is what we tackled. First, no surprise, we focused on the challenges in North America, Healthcare & Education. We've done a lot to turn the situation around and are starting to see results. What actions did we take? First, some drastic changes in the leadership teams. We made changes in both Healthcare and Universities from the CEOs down to several site managers. We simply needed a new approach, driven by new leadership skills, discipline with fresh creative thinking and a renewed focus on winning. Filtering this to the business takes time, but here are some metrics of our progress. In Healthcare, retention is up 130 basis points since 2018. And in Universities, excluding one voluntary exit, we've been over 95% retention for the past 2 years, even though we are not yet back to where we want to be. We exited unprofitable contracts. For Healthcare and Universities, this has meant a purposeful reduction of more than EUR 200 million of revenues. We measure and we track our performance management dashboard, STEP, introduced at the last Capital Markets Day, is helping improve productivity in several segments already. For example, pre-COVID in 2020, in Schools, in North America, we gained 98 basis points on our GP to labor cost. And in Healthcare, we gained 200 basis points on our GP to food costs. Overall, in FY '20, the retention in North America went up 230 basis points despite several significant contract exits in the Healthcare and Universities. We are advancing in this key market. Second major area of focus. We have rebalanced our offer between food and FM, global and local. We have put food services back into the heart of everything that we do. We have reasserted our excellence in food by driving innovation in our offers and in our menu choices, making a strong place for organic, locally produced and seasonal products. We have rebalanced our portfolio of contracts between global and local, single service, multi-service and food and FM by being much more selective on the large contracts, particularly in Corporate Services. And in H1 '20, the ratio of the food only and local contracts was around 75% and 50%, respectively. On the global contracts, we are only targeting the right ones and being more demanding on margin expectations. At the same time, we remain focused on our FM offer and on our integrated offer. Integrating our broad spectrum of activities has never been in such demand as it is today. Clients have realized and welcomed the breadth and depth of these solutions that Sodexo provides. And we are well positioned in places that have showed resilience, be it our strategic accounts that continued to outperform or our position in developing economies that have also provided growth and more recently, resilience. FM services represent 40% of On-site revenues in fiscal year '20. For global strategic accounts, FM is around 75%. So as we continue to sign, retain or extend these accounts, the FM activity continues to gain share. And as we cross-sell, the integrated FM has expanded. The COVID crisis and the work-from-home phenomenon has given a massive boost to client requests for on-site benefits and world joint offers to serve employees at work and at home. BRS is digitized and agile and is definitely an engine for profitable growth. Finally, our third major area that we tackled. We renew the culture of discipline and accountability by a relentless focus on execution. Our STEP program and its dashboard is now online, available across 19,000 sites in 17 countries. So far, it tracks 80% of Sodexo's revenues. We will have it fully deployed by October '21 as planned. STEP is easy to use and fully integrated, so we can see the performance of the activities at each level from the site to global. We have improved targeting and signing discipline, together with improved execution on underperforming large contracts. I mentioned this earlier for North America, but more generally across geographies and segments. We are renegotiating underperforming contracts and eradicating any loss-making contract globally. Our signing discipline is better. We don't go near unprofitable contracts anymore, and our targeting is much stricter and carefully aimed towards quality. And ultimately, all of this will boost underlying profitability. So besides tackling tough spots, let's look now at how we're driving our growth agenda. As you know, 4 key initiatives are really driving food performance. Number one, we are streamlining the organization to improve operational efficiency and productivity. We have desegmented in certain countries to optimize the allocation of resources. We have rationalized our portfolio. We continue to exit nonstrategic countries. Our geographic footprint is down from 80 countries to 64 as of today. And we are close to reaching our stated objective of 50 core countries. We've concentrated back offices in finance in 3 centers. There are even more efficiencies to be had through our ongoing savings program. Final aspect of our drive towards operational efficiency, we've invested annually an additional EUR 60 million to consolidate our IT enterprise architecture. Number two, we've created client and consumer-centricity, especially on food services. Thanks to our new insights and AI, we know so much better what our consumers want so that we can anticipate food trends, improve sourcing and standardize our processes. We streamlined our offers and concepts by nearly half. Our sourcing is even more virtuous. This means better product standards, tracking of progress against our menu and CSR targets. We have reinvested to make Sodexo more digitized and consumer-centric. And in digital, I'm excited by our investments in our 2 strategic partners. With Meican in China, we created a brand-new consumer experience for Chinese consumers. And with Zeta, we have a platform to leverage the full potential of digitization of Benefits and Reward and On-site food services, and you'll hear more from Aurélien on this later. During the crisis, we accelerated new food tech solutions, such as click and collect and food delivery. We launched our Deli Express in Brazil. And in Singapore, we created 70 partnerships between our BRS activity and major delivery platforms. And in the U.S., we recently invested in Alchemista, which offers new multi-model, multi-channel experience to food, especially where clients do not have on-site food options available to them. Finally, we overhauled our sales structure and how we market and win business. And we are rapidly digitizing, which is a huge strategic boost. In 2018, I appointed Bruno Vanhaelst to develop a holistic approach to marketing and sales and thus sharpen our sales culture. Under Bruno's leadership, we have reignited the sales obsession at Sodexo. We've also deployed in North America an updated version of clients for life. This is going well with retention up, bringing us closer to our group-wide target of 95%. Third driving initiative, anchoring corporate responsibility into everything that we do, which differentiates our offer and our value proposition. Corporate responsibility has been part of our DNA and the way we do business since our creation, and we are uniquely leading our industry with our strong ambitions. Some key points of pride. In 2019, we were #1 in our industry for the 15th consecutive year on the Dow Jones Sustainability Index. In 2020, we achieved the highest marks in SAM Sustainability Yearbook for the 13th consecutive year as well as Gold Class recognition by EcoVadis. Our food offer is more sustainable than ever. François will come back on this. Reducing waste is also an environmental and business priority. WasteWatch, our game-changing food management program, has an ambitious objective of reducing food waste on our sites by 50% by 2025. And this commitment is a win-win. In 2019, we were the first global food services company to connect its financing towards actions to prevent food waste. This environmental commitment has been key to winning some amazing prestigious contracts. For example, this year, we won a contract with a French leader in food products for their [indiscernible] in France or a global contract with one of the largest pharmaceutical leaders in the world. It is a key differentiator for Sodexo. And last, we have an ambitious climate change emissions target. Most companies talk about Scope 1 and Scope 2, but it's not strong enough. We made a commitment on Scope 3. We were the first company in our sector to publish and set objectives for Scope 3 emissions accounting for 98% of our total emissions. Now people. As you know, people are the essence of our services, our growth and our success. We employ 420,000 people worldwide. And we take their learning and development seriously to help them grow and serve our clients better. We invested massively in sales training. Two years ago, we launched our sales academy. 500 people have been through it. Chef training at our Chef Academy has already enriched 2,500 chefs across Sodexo. We invested in digital and innovative culture training to enhance agility as our people must be our main change agents. Performance management has also improved, thanks to the STEP dashboards that enable a more tailored approach to incentives. To conclude, in FY '19, we registered our best growth trajectory for the last 7 years. And up to the end of February, we were on track to deliver our fiscal year '20 guidance and our objective of increasing the margins to over 6% in the coming years. We have transformed our execution culture in less than 3 years. We've made great strides in addressing the issues in North America. And we have delivered on a large part of our strategic agenda. This pandemic is certainly the most serious crisis that Sodexo has faced in its 50 years of history. The teams rose to the occasion and demonstrated that even a large structure, they can be agile. And I want to warmly thank them and show you in the next couple of minutes what they've done. [Presentation]

This video epitomizes our great people and the critical importance of our services. So our biggest advantage is a resilient business model that allows us to seize market opportunities as they emerge in an environment which is likely to remain very difficult for a while. Dianne?

Thank you, Denis. That video really does capture the team spirit at Sodexo as well as the effort from all the employees during the crisis. So as we move to the next part of our agenda, I'm pleased to pass the floor to Cathy Desquesses and to Marc Rolland. Over to you.

Thank you, Dianne. Hello, everyone. Marc and I are going to cover the solidity of our financial structure, and importantly, how we continue to manage our teams in the context of this challenging environment, adjust our workforce to meet the changing needs of our business and ensure we stay true to our values and commitment to people being the alpha and the omega of Sodexo.

And as you know, our business is by design founded on 2 pillars: on the one hand, human-centric and labor-intensive; and on the other hand, asset-light and cash-generative. Those 2 pillars are fundamental to Sodexo's sustainability and our confidence in the future. A couple of days ago, we announced that in 2020, we generated cash, EUR 72 million, despite the worst crisis that we've ever seen. This includes a positive EUR 200 million of government aids through delayed payments and a negative EUR 150 million make-whole linked to the USPP early reimbursement. When we got hit in March by the drop in cash sales, we were still paying the suppliers from the time when everything was normal and client paid a little more slowly. During H2, we maintained our payments to suppliers, and we pushed hard on collection and reduce using value. Our working capital is by design negative in BRS, of course, but in On-site as well. And both BRS and On-site generated a positive free cash flow in the second half. Additionally, I would like to highlight key strengths of our balance sheet. We ended the year with EUR 5.1 billion of liquidity. Our net debt is amounting to EUR 1.9 billion, which is better than at the end of H1, but EUR 655 million higher than last year. Our net debt ratio is now 2.1 turn. We have no covenants anymore on our EUR 5 billion gross debt, and average maturity is 5.7 years. On cash collection, here, we are showing how we used our cash for the period 2017 to 2019. There was no surprises. In line with what we said during the 2018 Capital Markets Day, it was balanced, about 1/3 shareholder returns, 1/3 CapEx and 1/3 M&A. In 2020, we buckled down on cash. While the dividend was voted and paid before the COVID crisis had arrived, we paused on M&A and CapEx. In the second half, our CapEx was half of what was planned by pushing back projects. Only BRS, IT and digital CapEx were maintained at pre-COVID levels. As a result, the CapEx to sales ratio was maintained at circa 2% despite reduction in revenue. We still expect the run rate to increase to around 2.5% in the midterm as we expect to invest in CapEx to support the development of the new food models in the next 2 years filling the gap with the slower ramp-up in Universities and Sports & Leisure. With only EUR 18 million spend this year, we were extremely selective in our M&A in fiscal 2020, to say the least. But going forward, we will look at opportunities to support our acceleration in the new food model and GPO, to support BRS digital transformation and consolidate its position, to continue selective PHS acquisition, especially in Home Care, and to take advantage of opportunities to consolidate our positions and activities. We believe this could be around EUR 400 million of acquisitions per year. For 2021, we are also very focused on selling noncore activities and geographies. No buybacks are planned despite the share price. I highlight that this is not because we don't believe that our shares are seriously undervalued. As we will come progressively out of the crisis in fiscal year '21, we want to allocate our cash and priority to investments to prepare the future.

Thank you, Marc. You've explained how we've been impacted financially by COVID, and I'd like to spend some time talking about our people. Overall, the number of our employees is down 50,000 to date due to COVID, going from 470,000 in fiscal '19 to 420,000 today. This is due to multiple factors: attrition, layoffs, performance management, tightening of short-term contract usage and, of course, less recruitment than normal. Our teams swiftly responded to adjust our global workforce as volumes fell, always with respect and fairness. When we looked at the departures due to COVID, the majority of that impact has been felt in North America. Our teams in Asia Pacific, Latin America and Middle East and Africa have also been impacted, of course, but not as heavily as in North America. Our teams in Europe have suffered too, but to a lesser extent than the other parts of the world. When we look at this slide, it's easier to understand why the impact varies so much across our different geographies. The impact has been felt hardest in North America, as I said, when there have been no government-funded unemployment measures in place, then in Asia Pacific, Latin America and Middle East, Africa. Whereas in Europe, where most governments have implemented furlough schemes and partial employment measures, the impact on our people has been lower until now. Very early on in the crisis, we understood that COVID would have a significant social impact on our people. Our first priority was to maximize business volumes in order to keep people employed as much as possible. And when we could not keep them employed, we mitigated the impact by creating an employee relief program, committing EUR 30 million to supporting our most vulnerable employees. The program was enabled by our senior leaders foregoing their annual bonus for about EUR 20 million, and the rest by the company.

Many governments in Europe are progressively extending their furlough programs to 2021, but they are adding more conditions. At the same time, we have to be realistic in our planning and the actions we take. We must adapt our labor costs to our volumes. To remain agile and protect our profitability going forward, we decided to activate a number of restructuring plans as part of our group effectiveness and transformation program. We call it GET. This GET program further adjust our on-site labor cost revenues, protecting our gross profit. Much of the benefit will be in the form of cost avoidance as the furlough programs lift. It also achieved a sustainable reduction of our SG&A through simplification of our structures. The program started in H2 and will be implemented by the end of fiscal 2021. The total cost is estimated at EUR 350 million, of which EUR 158 million in fiscal 2020, so another EUR 192 million in fiscal 2021. The program will achieve cumulative annual savings of EUR 350 million in 2022, half of which in recurrent SG&A, the rest being on-site cost avoidance. I now hand you back to Cathy.

We don't make any of these decisions lightly, but we make them decisively. There's no denying that the next few months are going to be tough. We're going to make some further difficult decisions that will impact our people. But we're wholly committed to treating them with respect and fairness and doing whatever we can to minimize the social impact while ensuring we continue to motivate those people who will remain with us. Our diverse workforce is a real differentiator, grounded in our values since Sodexo was founded. In our recent engagement survey, 82.4% of our people are saying that they feel that Sodexo values diversity and inclusion. And I would just like to highlight that 40% of our 200 senior leaders are women. And that brings me to my final point about engagement. We launched our global survey at the beginning of September with a response rate of 59%. We achieved an engagement rate of 80%, which is not only significantly higher than last time, but it also tells us even in these difficult times, employees are engaged with our purpose. These results give us confidence that we are taking a fair and respectful approach. As leaders of this business, we have the duty to make the hard decisions. But we do it with real care for those people leaving us and importantly, for the talent remaining who are critical to our future success. As the job market reopens, I am convinced that candidates and employees will favor those organizations who treated their people well during this time of crisis. Brand authenticity, business integrity, culture, values will be key levers in the war for talent.

Thanks very much, Cathy, and thank you, Marc. It's great to hear how we have our focus on people while delivering results. So I'm happy now to turn the floor back over to Denis, who will share his perspectives on what lies ahead. Denis, the floor is yours.

Thank you, Dianne. Thank you, Cathy and Marc. Before we wrap this section of the day and head to our first Q&A session, I wanted to re-emphasize that our model has proven its relevance in this year's crisis. We have all worked brilliantly together and stepped up to serve our clients, offer new ideas and negotiate well to find win-win solutions for everyone. The Sodexo teams have been truly agile and entrepreneurial. From day one of the crisis, we had 3 priorities: people, clients and cash, and we moved fast. Marc and Cathy have already explained how we managed our people and how we secured our cash position. I want to spend a few minutes talking about how we supported our clients. For clients, the focus was on securing business continuity, ensuring consumer safety and thus safeguard retention. We've done really well on all fronts, serving our clients in very challenging conditions. Let's have a look at this testimonial from one of our health care clients in Nebraska. [Presentation]

We also won important new business, including testing centers in the U.K., additional disinfection cleaning services for our global accounts as well as supplementary FM services for our mining contracts to ensure they could offer social distancing to their employees. The opportunity ahead is now to turn our activities into a more holistic offer for all our clients. Let's now look at how we want to show up and compete. There is no doubt that our transformation has to keep up with this relentless pace of change. Effectively, we are doing 3 things: we rationalize, we enable and we transform. Let me focus on how we rationalize the cost base to safeguard the bottom line. Marc has already set out how we are going to achieve this through our GET, Global Effectiveness and Transformation program, launched in July. So what are we doing? First, we optimize our portfolio of services. Our hard FM review is done, and we are rationalizing our hard FM portfolio to keep only contracts where we know we can add value ruthlessly. Number two, we optimize our country portfolio. We are focused only on geographies with the biggest potential for us. Number three, we safeguard our gross profit. As a result of the crisis, we've been forced to rightsize our labor force, and we are continuing to keep a close eye on this. And number four, we continue to have a strict focus on execution. As we redesign and optimize, our structure becomes even more agile. We are reducing HQ and transversal functions, centralizing them where it makes sense. This means thinner global segments to drive investments and resources closer to the front line. All these measures will generate about EUR 175 million of SG&A savings. Then what do we mean by enable? We are investing in sales, retention, marketing, digital and IT to accelerate top line growth as well as continuing to invest to enhance our execution. And Sylvia, Bruno and François will tell you more in a few moments. Rationalize and enable will bring SG&A to our lowest level in 15 years while making sure we maintain the necessary level of investment to generate growth and support local recovery. As a result, we will be more competitive, and we will enhance growth. And finally, transform. We are transforming our core food business. Sunil, Aurélien and Sarosh will develop on how we are creating holistic offers that combine all our solutions to gain market share and grow the top line. We know that we can deliver great performance going forward. Let me remind you that our total addressable market across our food activities and segments is measured in trillions.

Thanks, Denis. And what a great testimonial from the client. So we'll now open it up for Q&A. Denis, Cathy and Marc are ready to take your questions. Over to you, Dolce, to get us started.

[Operator Instructions] And your first question comes from the line of Simon LeChipre from MainFirst.

Three questions, if I may. First of all, in North America, you mentioned what you have done to address your issues. So just wondering how happy are you right now with the performance of the specific Healthcare and Universities businesses? And what are the key aspects you need to further improve to achieve the right performance? And secondly, in terms of profitability, which proportion of the savings you announced this morning you expect to -- I mean, you need to reinvest over the next 2 years? And related to this, when do you expect margin to be back to the level of 2019? And lastly, you mentioned CapEx would accelerate, notably driven by new food models. How do you see the return on this incremental CapEx compared to the historical return of the industry?

Thank you, Simon, and thanks for being with us. Regarding -- I'll take the first one, I think. I'll talk about the margins. Marc will talk about profitability and CapEx. As far as North America is concerned, I think we've definitely stabilized the business. We have much stronger operations, both in Healthcare and Universities and it shows by a small solid gross margins. When you have a gross -- solid gross margin, you know that your operations are more solid. We've improved retention. I mentioned that earlier. We still have to improve the momentum in sales. We are reigniting sales, but the development is still an area of progress that we have to do there. But overall, I think I'm confident in the efforts that we are doing there. In terms of margin, and Marc will go in more details on the profitability, but in term of margins, what I can tell you is we've stabilized our margins pre-COVID. And we were on track to improve the margin from fiscal year '21 onwards. And of course, the COVID crisis has stopped this momentum. However, overall, no fundamental things have changed despite the COVID. And I still absolutely believe that once the crisis is over, we can rebuild our margins back up again. And the group efficiency and transformation program will definitely support this. Marc, in terms of...

Yes. In terms of the savings, as we explained, and Denis mentioned it, 50% of the program is really focused at delivering savings at SG&A levels. So we are expecting savings of EUR 175 million on the SG&A, and this will be achieved by 2022. So that will help build up the margin as we move forward. With regard to the CapEx, the CapEx on the new food model and the CapEx on GPO, they will have high returns. I mean we already have CapEx in central kitchens, in commissaries, and we know how to run those operation. We will just invest more because this is what's needed to support the growth in food. And we are expecting the ROCE to remain -- our target for ROCE is 15%, and this does not change.

And your next question comes from the line of Richard Clarke from Bernstein.

Just in the previous annual report, I think under your predecessors, you used to highlight that a 1% retention increase led to a 1% gross margin increase. Is that something you still agree with, that math? And given you've kind of highlighted some good moves on retention, when would you expect that benefit from retention to come through? Second question, you highlighted quite a few investments you've made in the new food offers. Is there going to be a plan to bring that under one umbrella to have one of leading delivery offer to clients? And what's the process to get to that? And then also on your ESG criteria, how often does this come up in discussions with clients? How much do you think that is an operational advantage to have those that greater investment in the ESG criteria?

Right. Marc will answer the retention margin, and I'll take the 2 other ones. Regarding investment in new food models, we -- definitely, we're bringing them together. And will it be -- at the moment, we have a common group that oversees that. I have nominated, for example, Bruno Vanhaelst to lead that group in North America in terms of how we accelerate the new food models. And of course, you will see later that Sunil and Aurélien, on what remains a critical Corporate Services domain, they're working very well together. We are putting our systems together as well to create a joint offer that is seamless for our clients. Will it be one day only 1 umbrella, 1 head? Possibly. But at the moment, we are concentrating on accelerating and scaling up all the initiatives that we have there. Regarding ESG, definitely, we see a great, great momentum in the discussions that we have with our clients. I mentioned earlier, this great win that we've had with a major food product manufacturer. And we have lots of conversations with our strategic accounts. Even in Energy & Resources, this is a big topic now. And we believe that we really have market advantage there. We've been in -- and François will come back to that. We have been sustainable sourcing for many, many years. And we will really accelerate that because we will take market share, thanks to our positioning.

Yes. And the math does not work. I mean, I'll check on when we did say that. But 1% of revenue is EUR 200 million. And 1% on margin, it's also EUR 200 million. So it's not possible. What we always say is that in margin, there is obviously a greater advantage to keep the business we have because it is less costly to keep what we have than to resign and ramp-up the margin. So there is a margin differential between an existing contract and a new contract. Margin varies. So if you assume it's 500 basis points, and I don't want to be quoted on that further than this call, 500 basis point on EUR 200 million is only EUR 10 million. So there is an advantage to keeping existing contract, but the maths do not work.

And I would add that, of course, retention varies, I mean, upon the portfolio that you have. We want to retain, of course, the most profitable contracts. That's for sure. And of course, depending -- as all segments do not have necessarily the exact same profitability, there is -- there are different ways that retention impacts the margins.

Just -- Marc, just so you've got the reference. It's on Page 33 of your 2017 annual report. It said a 1.6% client retention increase would lead to a 1.7 points increase in gross margin. But it's a few years ago now. I just want to check whether that was still the view.

Thanks, Richard. We'll look at it.

And your next question comes from the line of James Ainley from Citi.

Two questions, please. I just wanted to ask you about the new business environment and why you think that Sodexo can win better than it has done in the past? And maybe why the kind of post-COVID environment suits your business better than your competitors potentially? And then secondly, on the cost savings, should we think about these as defensive or offensive? In that sense, are these designed to offset cost pressures that you're seeing or potentially loss of business that you see? Or how much of this should we expect to flow to the bottom line?

Marc will answer this one. I'll just say quickly that we are both defensive and offensive, but he'll go in greater details. As far as the new business environment, let me just sum up what I see as being the 4 key takeaways of that ongoing crisis actually, and why I believe we're really well positioned. That crisis has highlighted that digitization is critical to operate, critical to liaise with our consumers and also reassure our clients. And digitization will help increase consumer spend. And Sunil will get back to that later. The second is we accelerate the flexibility of our production model and of our delivery model and the convergence between On-site and BRS. And that will help us, our company, work from home. And again, you'll hear about this later. We can also take a bigger share of what happens in small and medium companies because they also want simple offers, sometimes even on-site offers with convenience. More to come on this. Definitely, that crisis has demonstrated that the integration of services is a great asset and a great strength when we talk to our clients. And particularly, COVID is very complex to manage. And when you -- if you have to manage with 10 suppliers the old -- your workplace or the hospital or the universities, it's very complex. When you talk to one supplier that can embed all the services, it's very, very strong. And last but not least, and we mentioned that with Richard just a few minutes back, sustainability, and Sylvia will talk about the sustainability that the core of what consumers expect. And no, that will put us in a great place, and sustainability can also help improve consumer spend. So lots of elements that put us in this new environment in a great place. Marc?

And when we are looking at labor costs on site, obviously, our cost savings program is defensive. We are going to take over the programs and the furloughs will end, and so we need to protect our gross profit. On the SG&A side, what started as a defensive move. We had to adjust to the volume going down, actually was transformed into an offensive move. And this is -- the GET program is actually meant to be supporting the rebuild of the margin over time and achieve our midterm objectives in term of margin.

And your next question come from the line...

We'll take one more question. I think we need to move on afterwards.

And next question comes from the line of Jamie Rollo from Morgan Stanley.

I just have one -- sorry, 3 quick ones, please. First, is there still a 95% retention target in the medium to long term? Second, can you talk about incentives and how you're switching from the current environment on incentivizing people to reduce costs and maximize margin? And how you're going to transition to accelerating, again, the top line growth, which is the old target? And then is there anything you can say on the dividend? What's to stop the company paying a dividend in the current financial year in terms of leverage targets? And what might the payout be?

Thanks, Jamie. Yes, definitely, the 95% target is still there. And I can tell you, I want to be significantly above. It's going to take time, but I want to improve that. Retaining the clients demonstrate that you have solid services. As Marc said, it's great for the margins, and it's what we owe to our clients and to our people. So definitely, it's very high in the agenda. As far as the incentives, I think we don't necessarily talk to the same people. We, of course, incentivize our teams to retain the clients. We incentivize also other teams to develop the business. And when we reduce cost, we ensure that we reduce cost on the sites while maintaining client satisfaction. Let me give you a very simple example, Jamie. During that crisis, we've simplified our menus, and clients understand that very well. But as we simplified the menus, we've also demonstrated a lot of culinary experience that has satisfied our clients a lot. And we've really managed our cost really well. So this will help retention. At the same time, when we are already starting to incentivize our teams on the development, we have a more solid pipeline. We can get back to that later. And the rise with Sodexo offer that Bruno will talk about in a minute, and I think it's going to be very interesting to look at this, demonstrates that we can, at the same time, be efficient and reduce our cost, but also create a dynamic with our clients to capture the opportunities that we have ahead of us. As far as the dividend, Marc?

As for the dividend, yes, we stopped the dividend for this year because we felt it was inappropriate to pay a dividend fiscal year '20. It doesn't mean there will not be any dividend in the future, on the contrary. And when we look at the balance sheet today, we have no covenant. We have large liquidity. Yes, we have a net debt-to-EBITDA ratio above 2, and we said we would like to stay between 1 and 2. But today, we don't come out of a Board meeting with a serious constraint on the balance sheet. We have ample liquidity and no covenant. I mean, that's it.

Terrific. Thank you -- oh, I'm sorry. Thanks so much for that robust exchange. Really great Qs and As. So now we're ready to move to the next part of our agenda. So now I'm pleased to welcome Sylvia Metayer, Chief Growth Officer, who will talk about key market trends impacting our business, particularly working from home because we know that's on everybody's mind these days; François Blanckaert, our Chief Procurement Officer, on how supply management has become an important growth driver. And we're also joined by Bruno Vanhaelst, our Chief Sales and Marketing Officer, who will share more around our sales and marketing transformation. Sylvia, the floor is yours.

Thanks, Dianne. Good morning, good afternoon, good evening to all. I'm happy to be sharing with you some insights today on Sodexo's growth perspective. The COVID crisis has not changed our fundamental belief that our markets are sizable and that we can capture growth by targeting growing geographies by increasing the share of outsourcing, by partnering with clients in dynamic sectors and, of course, delighting our consumers. At the heart of this crisis, we've demonstrated the resiliency of our portfolio, and we are well equipped to respond to 2 new factors: sanitary restrictions in the short to medium term; and the acceleration of working from home, which will be a long-term shift. So first, how long will the crisis last? Well, clearly, until widespread therapeutic solutions are available, any new infection wave will be contained by social distancing and lockdown, limiting activity on nonessential sites and for nonessential services. And this will play out very differently by country in terms of infection rates and local regulatory response. The length of the lockdown, government stimuli and pre-existing economic drivers will also determine very locally the scale of the economic impact. So predicting short term is a challenge. But we do project China and Asia recovering first from the crisis, remaining our fastest growth market, and regaining its pre-COVID 10% trajectory. The U.S. economic environment should improve next. And this is key as it continues to be structurally the largest and the most profitable of our markets. LatAm and Europe will probably lag the U.S. So given the uncertainty, our priority is to be close to our clients, engaging with them digitally or directly at top level and continually surveying our consumers, and Bruno will show you how we've done that. Let me share with you now how we're responding to the current change in demand. First, as you can see, hygiene, very unsurprisingly, tops the list of demand. Nearly 90% of consumers surveyed want to see the evidence of hygiene before they return to any site. Leveraging our Healthcare business and our expertise in infection prevention, we are deploying clinical-grade protocols worldwide and across all of our services, including food services. And these protocols are audited by Bureau Veritas with a visible on-site label for consumers. Second, contactless is gaining ground, especially as it is seen as a prevention measure of infection. So we are accelerating existing digital services, such as click and collect, food delivery and digital payments. And of course, Benefits & Rewards is our ultimate contactless service and a great solution for our On-site clients. Then we see traceability of supply and local sourcing increasingly drive consumer choices, and this is coupled with clients' need for global scale and supply. And François will explain how the transformation of the supply management in which we engage precrisis resonates perfectly with this demand. Last but not least, outsourcing requests are increasing, cross-selling, more integrated services, larger regional or global integration and first-time outsourcing. In fact, in our U.S. marketing and sales distribution center, 1 in 3 of the digital requests received since the beginning of the year has been for first time outsourcing. First time outsourcing is a key factor for growth. In FY '19, it represented 40% in value of our North American development. And we always expect first time outsourcing to increase when the economy gets difficult. But what we are seeing now are clear requests for expert and scaled solutions. Most of these trends will continue once the crisis is over. You can see it on this slide, and this will mean continued service adaptation, especially on delivery and digital. If we want a better understanding of longer-term growth, we need to drill down by client vertical as the impact on each market is different postcrisis. As you can see on this slide, we will revert largely to precrisis market growth once the sanitary crisis is resolved. I do, however, want to call out the acceleration on Healthcare & Seniors markets. Our clients continue to operate throughout lockdown, they continue to operate now, and they will continue to operate postcrisis. Retail food services were shut down, but this is actually a small part of our business. More importantly, our clients are critically reliant on our services to ensure 24/7 business continuity, and this translates into increased volumes, especially for FM. In fact, those services were up 7.4% in Q4 FY '20. I think it's best is to hear a client explain it. [Presentation]

As I thought, the client does say it much better than we can. This partnership-led demand will continue in Healthcare beyond the crisis. And with the return of retail food services, new services, such as the ones in testing centers and also first time outsourcing, we're looking to sustainable growth in the Healthcare market. Now the market dynamics are much more contrasted for our Business & Administration clients. On-site services for manufacturing, production and remote sites are very resilient. These clients have largely not shut down, and our services are even more critical now for them. We expect continued growth in these markets, especially in integrated facility management. Two examples, pharma clients, which represent a majority of our global strategic accounts, are increasing their number of production sites and the volume of outsourced services. And we are also seeing and will continue to see good growth on mining sites. However, the speed and shape of the recovery for the On-site Services we deliver in offices will be dictated by the long-term shift in working from home, and this will have a definite impact on the provision of food services. Before we dig down into work from home and On-site Services, I did want to highlight that it doesn't impact the growth in Benefits & Rewards Services, which is not linked to the number of employees on site. And in fact, we see growth in BRS as our On-site clients understand that this is a solution for employees at home and turn to us as the only partner who can provide both solutions. So how does work from home impact Sodexo's business? First, you should know that precrisis, the revenues from food services on office-type sites worth about EUR 1.7 billion, which is less than 10% of our total portfolio. This may seem low to you, but remember that our portfolio is not weighted to single-service food provision, tech clients or large city centers, all of which are very exposed. So to understand the magnitude of the impact of work from home on this portfolio, we've run since April, 24,000 consumer interviews and more than 1,000 client interviews. And I'd like to highlight 2 caveats to this data. First, employers are still finalizing their policies. And in fact, actually quite keen to here from Sodexo what our insights are. Second, consumer data at this stage is still sentiment, and it's evolving. The number of respondents wanting to work exclusively from home, for instance, has been dropping regularly and significantly since April. But what the data tells us and what is clear is that employees do want to go back to the office, and they are happy once they are back at the office. They miss the collaboration, they miss the comfortable workspace, and they do perceive a deterioration of their work-life balance when they are working from home. And employers want employees back at the office, so the numbers on this slide speak for themselves. But I will highlight the key reasons, so also collaboration, just like for employees, but also ability to innovate, protection of company culture and the personal engagement of employees. But what is also clear is that office workers will not come back 5 days a week to the office. Our data shows the rate of working from home will stabilize globally at a mean of 2 days a week with a wide standard deviation by country and by industry. Now precrisis, office employees had already started to work from home. So what we need to look at is the net effect. And the net effect, pre and post pandemic is also very contrasted by country. For Sodexo's portfolio of countries and clients, this would translate to a 27% reduction of the time employees spend in the office compared to pre-COVID. So you might do the math quickly. 27% of EUR 1.7 billion is EUR 460 million. Does that mean that we lose EUR 460 million of revenue because of working from home policies? Well, actually, we think not. And the first reason is that our data shows us that employees miss the food services at work, and that tells us that we can capture greater share of wallet the days they are at the office with targeted offers. And the beauty of the data and the surveying consumers regularly is that we already know what they want, and you can see it on this slide. The surprise for me is that affordability is not coming out as a top factor as we would have seen precrisis. So a lots of opportunity to capture share of wallet. Second, employees are requesting food services at home. It's not just that they will need to be fed, but they want their employers to continue feeding them. That's a key part of the relationship. And that's great news for Sodexo because we can uniquely help our clients bring solutions to their employees. With BRS in the countries where we're present, just look at that 26% of respondents asking for vouchers and cards, and also with the capabilities that we are developing around food delivery or have already developed. It's interesting to note that there's also a demand for employee-funded health and wellness support -- or employer funded, especially on mental health. And our ecosystem of partners can be a solution for this need, and you'll be able to see it when Bruno presents a rise with Sodexo offer. And our third reason for confidence is that our clients are seeking our help as they rethink the purpose of their office space. Our people-centric approach and offers in facilities management, workplace services, energy management and space analytics are really unique on the market to make offices the most engaging, flexible and productive places to be. So as you can see, we are really well placed to address work from home. And you'll be hearing more from Aurélien, Sarosh and Sunil how we are doing this innovatively and proactively. I will end on that note, hoping you now have a better understanding of our vision for the business. Maybe 3 takeaways from this presentation: our portfolio is resilient, the market fundamentals remain solid, and Sodexo is uniquely placed to embrace the shift to working from home. I'll now hand it over to François Blanckaert. As I mentioned to you, supply management is key to our growth strategy pre and post crisis, and he will give you perspective on what we're doing.

Thank you, Sylvia. Hello, everyone. It's a pleasure to be here with you today. I'm going to share more about how supply management has become a strategic asset for Sodexo, both to respond and anticipate consumer expectations and, of course, to improve our cost base. Today, our procurement team of 850 people runs EUR 20 billion of spend every year for both Sodexo and Entegra from approximately 150,000 suppliers around the world. We have 3 objectives: to improve our cost, gain efficiencies, raise competitiveness, then to bring value for consumers to drive top line growth, and all this, while ensuring safety and quality and mitigating risk. We are investing EUR 40 million over 3 years through the P&L to create efficiencies, accelerate the digitalization of the function and consolidate our approach to responsible sourcing. Fiscal year '20 was year 1 of this transformation, and we already see the benefits. Our supply management team was on the front line in the middle of the COVID crisis. They stepped up and secured supply of materials to ensure business continuity and supply of critical protective equipment to keep our people safe. And despite this heavy crisis management activity, we stayed on track on our investment. First, we see real efficiencies. We delivered on last year's ambition, we improve cash management, controlled cost inflation and delivered the expected cost savings in all areas of spend. And the good news is that the payback on this investment is extremely fast. Second, we are accelerating the digitalization of the supply chain as and with the deployment of new solution. And today, I want to focus on the third, our clear, responsible sourcing strategy, which is centered around 3 key pillars and ambitious commitments that truly distinguish Sodexo. The first pillar is health and well-being, that's sourcing the healthiest ingredients in conformity with our high nutritional standards. Social equity is the second one. Especially when it comes to a relationship with small and medium enterprises, we are committed to spending EUR 2 billion with SMEs by 2025. And the third pillar is to protect and restore natural ecosystems. Our key priority in this area is to engage in a low-carbon supply chain to help deliver our target of cutting emissions by 34% on Scope 1, 2 and 3. To achieve these ambitious commitments, we are taking 3 line of action. So first, we are strengthening our foundation. This is about continuing to ensure food safety and quality through regular audits and testing. Then it's about ensuring the proper due diligence for human rights and ethics. Close to 96% of our global spend is with contracted suppliers who have signed the Sodexo supplier code of conduct. And food is not all what we buy. For instance, for uniforms, a high-risk category when it comes to working conditions and quality, we have our own Sodexo team on supplier site to ensure compliance. The second line of action is to go upstream to deliver more value to the business. And we go where the innovation is. Whether we're talking about large supplier or small companies, they both can bring value. And when it comes to local supplier, whether with farmers, bakers and food producer as well as plumbers and electricians for FM services, we spent EUR 1.5 billion this year. It's up from EUR 1.3 billion last year, and we are on track to deliver EUR 2 billion spend commitment with SMEs. We know it can be difficult for SMEs to enter the supply chain of large organizations. We won't sacrifice our standards when working with smaller companies. So therefore, as we do in France, we help them through training, coaching and support to integrate them smoothly. And you might have seen, we were 1 of 10 companies recognized by the French government and cited as an example for virtuous and inclusive way we manage our supplier during the COVID crisis. This is some of the value brought by our partner inclusion program. The third line of action is to create accretive partnerships. We face very complex challenges, such as food waste, carbon emissions, animal welfare, human rights, diversity and we are just a tiny part of a vast supply chain. Many challenges cannot be addressed alone. This is why we partner, whether it's with our suppliers, other companies or NGOs. Let's take our partnership with WWF, as an example. For a decade, they have helped us work on a range of leading positions on different commodities such as seafood, palm oil and more recently, on deforestation to help us to meet our carbon footprint target. For food waste, we have chosen to partner with several organizations to tackle all aspects of this complex issue. Together with our partners, we are transforming our supply chain and making it a decisive advantage for Sodexo. We want our clients to know that when they sign with Sodexo, aside from getting a competitive offer at the right price, they are also fostering health and well-being, social equity and a lower environmental impact and much better responsible sourcing in our offer to clients and consumer. It's why I team up with Bruno, who is going now to tell you more about our marketing and sales road map. Over to you, Bruno.

Hello, everyone, and thank you, François. I'm pleased to be with you today. And just like François did with supply management over the last 2 years, we've been investing aggressively in the transformation of our marketing, sales and retention activities to implement a consistent approach with best-in-class capabilities, keeping our clients and consumer needs at the heart. First, let me tell you about the world in which we operate, pre- and post-COVID. The B2B marketing and sales world that has experienced more changes in the last 5 years than in the previous 25. Living in an increasingly tech-driven world, selling has gone digital and social. The buyer's journey is now a mix of physical and digital touch points. Building the right engagement with the right content for the right clients at the right time is essential and most importantly, with the right service built on actionable insight. Therefore, we've started to rebuild a broad and omnichannel approach, a mix between the best in person and digital, using the power of data and technology to build a more interactive and personalized journey for our clients and more relevant services for our consumers. This combination of very relevant digital interaction with the Sodexo human touch is strengthening our go-to-market strategies, enhancing sales effectiveness and ultimately, really truly building unique relationships with our clients. Now what does that mean exactly? Well, over the last 2 years, we have reset our marketing and sales approach to be more proactive gaining agility and scalability and truly leverage our global footprint. How did we do this? We focused on 5 key actions. First, actionable client and consumer insights at the heart of everything we do. For example, we launched the Harris Interactive tracker across 8 countries around the world, which allows us on a quarterly basis to have a deep understanding of evolving consumer needs. We've also built through primary research for many of our segments, a formalized understanding of buyers journeys. Second, we have a consistent marketing strategy across all segments and regions, centered around clear value propositions, delivering strong consumer experiences, building on trends like sustainability and health and wellness. This is improving deployment speed and scalability. Third, we are building a stronger, more concentrated service portfolio. In the last year, we have reduced our portfolio of food offers by nearly 50%. Today, we have 65 internal brands and 35 external brands, which are leveraged across all our segments. We're focusing on resources on building robust brands with more impact. Fourth, we're transitioning to an account-based marketing and sales approach. So the concept is simple. Instead of selling everything to everyone, we're focusing on selling our top services to high-value accounts. Instead of going after every RFP, we're going after those that make the most sense. We're going deeper instead of going wider. For instance, in North America, over the last 18 months, we've clearly identified the ideal client profile for each segment, leading to a clear target account list, and we're now proactively engaging with these accounts to boost conversion and upselling. And then finally, we're building a more proactive digital and physical engagement with target accounts throughout the sales and contract life cycle. This human digital balance gives us the ability to better allocate our resources. Using best-in-class technology, we can better rate the buyer intent from a scale from 0 to 100, qualify the lead and determine the ideal way to allocate sales resources. For instance, a small cleaning contract worth $0.5 million in value could be closed with our virtual selling team. But for a much larger contract, $35 million, including food and FM services, we would engage the field sales team in the process. This is a much more effective use of our resources. Now to do this, we've been investing in 3 key enablers. One, we have deployed in 9 months a group-wide CRM across all regions for our On-site Services. This is truly the backbone of our sales, marketing and retention structure, enabling far better tracking of pipeline management, conversion rates and retention. We've started to reap the benefits. We now have more than 2,500 daily users across the world for whom we organized dozens of regional training sessions, doubling data quality and tripling usage rates in the last 12 months. And we're also complementing our CRM with additional layers of technology such as marketing automation, predictive and analytics, content management, data enrichment, social media intelligence and overall online tracking. Two, we're expanding our digital marketing and inside sales capabilities with the launch of the marketing and sales distribution centers, what we call our MSDCs, in North America and in Europe. These are regional centers with 20 dedicated digital marketing and inside sales professionals. These are champions of lead generation and qualification. Each person can reach up to 75 interactions per day. To date, in North America, we've had more than 15,000 virtual interactions with clients and prospects, building an incremental pipeline of more than $200 million in the U.S. alone in a few weeks. In the recent COVID context, these teams are actually already in place to virtually connect with prospects and client, which was a tremendous competitive advantage. And three, we're investing in retention. We're revamping Clients for Life, our group-wide retention program with an enhanced process, new technologies, integration into the CRM for better tracking as well as the usage of data analytics to gain more insights. Furthermore, we're piloting a new client life-cycle management team in North America, regrouping all our client retention experts, building a 360 view of our clients leveraging again technology. This has already started showing promising results. Although all these actions have just been implemented, we've already seen the potential of the approach showcased in rise with Sodexo, as you will see in this video. [Presentation]

With our new approach, in a matter of few weeks, we were able to develop and launch this transversal program focused on solutions for our clients to get back to business in the COVID environment. This program showcases our absolutely unique competitive position in the market, answering the need for optimal integration of multiple food and FM services. We use cutting-edge insights from our operations and external partners to understand what was needed and how we could contribute to protect the health and well-being of our employees, clients and consumers. And with the synergies between On-site Services, Benefits & Rewards and Personal & Home Services, we build a truly client- and consumer-centric solutions to respond to their needs and pain points unique in the market. The program was also stand by a medical advisory committee and by the Bureau Veritas label, Rise SAFE. And we get to the market quickly by focusing on a target list of prospects and clients, enabled by digital marketing and inside sales team, which was essential given the restrictions on face-to-face biddings. As you can see, with the support of the MSDC, for Corporate Services alone, we held over 15 webinars, reaching over 2,000 attendees across 12 countries. Globally, the Rise with Sodexo digital campaign has led to a 51 Share of Voice in social media among our competitors' COVID-related programs and has been the most mentioned across social media sources. The Rise with Sodexo program clearly demonstrates the unmatched value of our service portfolio and its relevance across segments and regions. Over the last 2 years, we've been setting the foundation to strengthen our go-to-market strategies, build the right services, enhance our sales effectiveness and drive better retention. We have seen the early signs of progress with more impact expected in the medium to long term. Back to you, Dianne.

Thanks very much, Bruno, and thank you, Sylvia and François. So now let's get started on our next Q&A question -- session. Dolce, over to you, please.

Thank you, ladies and gentlemen. [Operator Instructions] And your first question comes from the line of Jarrod Castle from UBS.

Just maybe I'll limit it to 2, if I may. One, you kind of gave at least the 6%-plus margin target. Do you pay to -- do you -- I mean, would you be prepared to give some color in terms of B&R versus On-site in terms of where you could get to? And by how much do you think you can close the gap in terms of best-in-class in each business? And then in terms of third-party procurement, you kind of referred to the EUR 20 billion number. Where are we at the moment relative to the EUR 20 billion? And how much of that number now comes from procurement for your own contracts versus third parties, please?

Thanks, Jarrod. And of course, François will answer to the second question. I'll take the first one. Definitely, I think reaching 6%-plus margin is, as I said, is still a serious target. The question is not whether, but when. What I can say, it's going to be, of course, a combination of both On-site improving its margins and the GET Program is definitely a support to this. At this moment, of course, margins of BRS have decreased. They can rebuild progressively. Aurélien will give a little light on this as -- in the next session. But I think that on both activities, our target is to progressively restore them and to be very close or at peer level to be progressively best-in-class, yes. And of course, I mean, it's really an objective, and we're working hard on this. And in On-site, we're working hard on the gross margin as well as on our costs as well. And definitely, BRS will leverage the volumes as they come back. On the...

On the EUR 20 billion, to be clear, the breakdown of the EUR 20 billion, we have EUR 6 billion for food and supply, EUR 3 billion to support our FM business and EUR 11 billion for Entegra. Indeed the third-party part is very important, and it's an important part of the investment we are making in supply management to really help to develop and support our facility management capabilities.

Your next question comes from the line of Jaafar Mestari from Exane BNP Paribas.

It's Jaafar from Exane. I've got 2 questions, if that's okay. Firstly, on the risk assessments on remote work. Can you just help us reconcile minus 27% reduction in office hours with the other statements that only less than 10% of your corporate volumes are at risk? Of course, I see that minus 27% applies only to office, which is only half of corporate. But then even with that, it sounds like you're assuming that you're going to recoup 1/3 of the volume impact through higher spend per customer. Is that correct? And what gives you confidence that there's such an increase in spend per customer? And secondly, on medium-term profitability, if your revenue to EBIT drop-through remains the same at around 20%, then with EUR 300 million cost savings, you could, in theory, deliver your full year '19 margin with, I calculate, something like 8% total reduction in group revenue. But that doesn't seem to be what you're expecting, so if corporate volume comes down 10% and the rest is not permanently impaired. So is it right to assume that in full year '22, you could have a significant net increase in the margins already because you will have delivered those savings? And lastly, on the cost savings, investors will have 1 or 2 experiences with cost savings at Sodexo. 2014, '15, you delivered significant margin improvement, but then we find out that this has impaired the group's ability to grow. Or more recently, you've delivered on savings, but they have been mostly defensive, they haven't really benefited the bottom line. So on that spectrum, where do we think this new cost savings ends up? And what have been the lessons learned from the previous cost savings programs?

Let me -- thanks, Jaafar, and let me answer to the last 2 questions, and then Sylvia will answer the first one. Regarding the savings that we are doing, first, as Marc said, half of the GET Program is around gross margin and cost avoidance. So it's a protection of our gross margin. It doesn't generate an immediate bottom line impact. So it's more half of it that helps us increase the margins and also mitigate some of the pressure that we can have on the top line and the gross margins. Definitely, our goal is to -- '21 will still be -- there's still uncertainty -- a lot of uncertainty out there, and it's hard to fully predict. That's why, we've given guidance only on the first half. But I -- what we all believe is that as vaccine come and as a vaccination is deployed across our 3 main markets, we will see things progressively stabilizing, recovering our volumes progressively, and of course, from -- hopefully, from '22 onwards, our margins improving. In terms of what you said about the cost savings program, the lessons learned are that we had cut costs, particularly very close to the field. And one of the reasons that I mentioned at that time was, when -- right after the profit warning was that, particularly in North America, we had cut costs in operational -- in operations just above sites. And that has been a mistake because we're not controlling and supporting our business anymore. What we do here is, first, it's a sizable impact, but we take the time to do it well. As Marc said, we've started at the end of fiscal '20, and it will last until '21 -- at the end of fiscal '21. So it's going to -- it would take time to adjust to the structure. What we do mainly is we sort of reduce the global structures that have costed a lot and not necessarily deliver all the impact that we wanted. So we're going -- we put the resources closer to the field, really streamlined the global resources. And I think in doing so, we keep the power, let's say, close to the operations. So that makes me more confident that this is a sustainable savings and that will also sustain the business. Sylvia, on the first one?

Yes. Thanks, Jaafar. Let me go through the math again. So work from home will only impact food services on office sites. So no impact projected on production sites and no impact projected for FM spend. That's the EUR 1.7 billion throughout the group, which is less than 10% of group revenues. The 27% is basically saying, on those sites, probably, the consumers or employees will be there 27% less of the time. So it's just a straight mathematical application of 27% on to that EUR 1.7 billion portfolio, which is only office sites and only food services. So in fact, there's no recuperation which is embedded in that 27%. As I've told you, my optimistic thought is that actually we can recoup all of it. But that's optimistic.

Yes. And it's going to be a mix. It's going to be a mix that -- the mix of services that we will have and the way we deliver our services will evolve with On-site, with BRS, with more FM, it's the whole mix that will evolve.

And food delivery.

And food delivery, yes.

That's okay. Just to clarify, so minus 27%, I think, is very clear from your presentation, what this represents. And what I was trying to ask is, how do we go from minus 27% reduction in office hour in food services, corporate services, office types from this to the other figure, which is minus 10% volume risk, which you are referencing in the press release this morning? And that's minus 10% of total corporate services, if I'm correct. What's the bridge there, please?

I believe, but we will check, that the 10% that's referenced this morning is 10% of total group revenues. And so we'll -- let's have -- we'll come back to you in the next meeting.

The EUR 500 million that you mentioned, right, the EUR 490 million that you mentioned, represent 10% of Corporate Services volumes, okay?

This is not 10%.

And if it's that 10% that you've referenced to, Jaafar, and I think you have to also take into account the portfolio that we have. In Corporate Services, we have a significant part of our business, which is done in manufacturing in a significant part -- and that part is not impacted by working from home. If we look at, particularly, what we do in Latin America, for example, in Italy, in the U.K., we have a much more proportion -- there's a greater proportion in manufacturing and blue collar. And this is not impacted by working from home.

So the takeaway is minus 10% doesn't include any mitigation or increase in spend per head? Or anything like that?

Yes. Yes. No, exactly. 10% is the impact, and we can compensate partly, or hopefully, fully this impact.

And your next question comes from the line of Richard Clarke from Bernstein.

Yes. Just a quick question on Slide 70 that you presented with the different color, the different traffic-light colors and how we should interpret that going forward. You've got sort of gray bars next to universities and office sites. Are we to conclude that, therefore, those are not growth targets going forward and growth should really be more in health care, a bit in sports production sites and the BRS business? And just on the point that you can recoup some of the working-from-home revenues. I'm just wondering what the evidence is to date on that higher takeup for those that are in the office? Is that happening through the pandemic? Or is that more of a hope looking beyond it?

So on the traffic lights, definitely, we believe that universities and office space in corporations are still very interesting areas that we will explore, that we will continue to develop. There is still a big question on -- in the next 2 years on how universities will deal with the pandemic, as I said, until vaccine is -- are there and vaccination is redeployed. As you know, the enrollment is decreasing in the U.S. And you all know that the vast majority, the classic totality of our business is in universities in the U.S. So still a lot of question mark moving forward. But once the pandemic is over, we will have to look at what's the proportion -- how universities adapt to a new normal. Will online remain? And to what extent? What will be the proportion between borders and the commuters students? And still -- there's still uncertainty there. But we believe still that it's for profitable segments where we have a lot to bring. We know that students from also our surveys, they're willing to have nice dining options. They want to have a campus life, and dining is part of the campus life. So we still believe that it's an interesting area -- segment to develop. And of course, office and back to what Sylvia was saying, office is, definitely, we will continue in Corporate Services to be very relevant. The workplace is critical for our clients. Life at the workplace is critical. And food services are an important part of the workplace life. It's a place where people gather, people exchange. And of course, we'll get back to a new normal after vaccination. As far as the evidence of higher takeup, I think I would leave this question to the next session because Sunil will give you, I think, some -- will give you some light on this in the next session, I think.

So how should we interpret the traffic lights then? Is it sort of a medium-term outlook for the next couple of years after containment rather than a longer-term outlook?

Absolutely. That is how you should interpret it.

Terrific. That's the end of the Q&A session and the first half of our agenda. So now we'll have a 15-minute break. During the break, we're going to be playing a video on our Love of Food, and it showcases our exceptional capabilities, and it will make you hungry; and a second video on the importance of preventing food waste. Both these topics are key to what we do and how we do it. After the break, you'll hear from some of the trends we just looked at and how they're translating into our business. So get up, stretch, grab something to drink or eat and check out the videos. We'll be back in 15 minutes. [Presentation] [Break]

Welcome back, everyone. I hope you had a chance to move around a little as well as take in the videos. As we begin this next part of the agenda, we'll hear from 3 of our group ComEx members. First, Sunil Nayak, our Corporate Services CEO Worldwide. And Sunil will present on some of the opportunities that lie ahead for our Corporate Services segment. Aurélien Sonet, our CEO, Benefits & Rewards Services Worldwide, will share what's new in his activity as well as the synergies with On-site Services. And they'll be joined by Sarosh Mistry, our Region Chair for North America. He'll tell us more about how Sodexo plans to grow in the important North American market over the next few years. And immediately following their remarks, we'll have another Q&A. So let's get going. Sunil, over to you to start us off.

Thank you, Dianne. Hello, everyone. I am happy to be with all of you today. Before I start, let me remind you that Corporate Services represents 26% of our global revenue, providing food and FM services to local, regional and global companies and their employees around the world. Since Sodexo's foundation over 50 years ago, our mission has been to improve the quality of life of our people and those we serve, and this has really driven our strategy. We've diversified our services from food to FM, rebalanced our client mix between global and local and invested in emerging markets. Today, our global strategic accounts contributed 26% of our revenue. FM services have grown significantly and contribute 40% of the mix. And we've had really good success in emerging markets, which now represent 30% of our business volume in Corporate Services. This portfolio mix has been a key element for us to serve our clients, but more importantly, as Denis said, has helped us remain relatively resilient during the crisis. And in fact, looking at the trends the crisis has thrown open, we believe our portfolio is really well prepared to support a faster recovery for us in the future. We know that the market is still worth over $350 billion, even though our revenues were impacted this year. The top 5 players only contribute to 7% of the market. And it is still very fragmented with local and single-service providers. But this market is shifting, following some really key trends. Sylvia has gone into the detail. So I am only going to highlight those that are particularly significant to our business segment. The first trend is flexibility. It's not only about work from home because flexibility is driving the need to optimize spaces, offices and restaurants, and of course, reduce costs. But simultaneously, and that's important, leaders and HR professionals are trying to find ways to keep employees engaged and strengthen the culture and DNA of their organization. After COVID, they are looking to provide best-in-class services, both at their workplace and for employees working from home. And this is driving the growth of the market towards outsourcing, integration of services and a big focus on employee services. So armed with a really resilient portfolio in a hugely fragmented market, I do believe we are best positioned to leverage the opportunities that have emerged. We expect to get back to around 6% CAGR post COVID. So let me talk you through our strategy on how we're going to achieve this. So we know food contributes 60% of our revenue. And as you've seen earlier, we expect a 20% impact from work from home on our office food portfolio over the long term, so 10% of our Corporate Service's total revenues. So our plan is first to recover this, we will recover it, but then also grow in this big market. The first step of recovery is to reduce our cost of delivery. We're doing this by supplying more of our food from central kitchens, cloud kitchens and commissaries, and we have around 200 off-site production units around the world. This will help us enhance our margin on food through a commercial model that requires less labor on-site and more of food delivery. The second step is to increase the share of wallet and create more touch points with consumers. By digitalizing our services with preorder, prepaid, COVID safety pickup, we have already seen an increase in spend and participation between 5% to 10%. And we have a great example in China, where we partnered with Meican to offer a digital platform, allowing customers the flexibility to choose best-in-class food brands in or outside their workplace. And likewise in France, our proprietary digital platform, So Happy, is used daily by 250,000 consumers with numbers growing rapidly. And we have similar partnerships underway with technology platform companies in other parts of the world. Moreover, let's not forget, digital preorder and prepay systems generate less food waste, and that's completely in line with our Better Tomorrow goals. But we want to grow. We want to grow by winning new customers and new markets like sites without kitchen. And to do this, we have invested and are partnering with local boutique companies who have commissaries like Alchemy in the U.S. and FoodChéri in France to modernize corporate dining and bring high quality and healthy menus that are locally sourced. And finally, a big opportunity lies in the complementary of our activities with BRS as employees work from home. Clients want to give benefits to their employees on food and other services. In the last few weeks, we've secured contracts in France, providing meal cards to employees who can use them, either when they're working from home or in the Sodexo restaurant when in the office. And this demand is growing fast, and our key clients see the value in the integration of systems, providing a seamless solution. For example, for our client, Oddo BHF, we are providing access to the entire catering offer. They can have lunch at the office or have it delivered with an omni-channel payment option, either with the restaurant pass card, the company badge, mobile payment or credit card. In addition, information is provided to the kitchens regarding days off and homeworking, really helping to reduce wastes. This integrated seamless solution is a unique offer we can provide. Back to our strategy. Unlike the food business, FM, and especially, workplace are pure growth plays for us. Today, 40% of our revenues come from FM services, and this will continue to grow through local, regional and global contracts as companies integrate their services, including food. The IFM market is expected to grow to be at 15% by 2025. And in the U.S., there's a large opportunity in first-generation outsourcing. We do believe it's going to be a busy market. And we've had really good growth in the past, and we want to accelerate this. So we're doing 3 key things. First, we're launching Vital Spaces, an integrated service offer that shifts the conversation from FM to broader workplace solution. This offer helps our clients better engage their employees and optimize costs by providing an ecosystem of services, like workplace design, workspace management and work-life services for their employees. Second, we're expanding Wx, our own start-up, to provide specialized consulting services on workplaces as clients rethink the design and the use of their spaces. This is also a part of our Vital Spaces offer, and it's a great entry point for integrated FM development. Lastly, we need to improve client and customer stickiness through enhanced and seamless workplace experience and continue to drive efficiency using data. We've successfully launched our Wondo digital platform at 400 sites, and we want to expand this with new and existing clients, 1 app for all services, really driving customer engagement and experience. And moreover, these comprehensive, more complex offers will also increase stickiness, and therefore, retention in our business. Before I finish, I just want to add to what Denis said earlier about sustainability. We have a role to play here other than in food as 30% to 40% of energy consumption is generated from buildings. For example, with one of our strategic accounts where we provide FM services, we were able to generate savings for the client, giving them a payback within 2 years and support them in reducing their carbon footprint. This is very important for the client and as important for us. To summarize, we began with food, and food will always be core to our business model. But quality of life is our ambition. And to grow in this market, we not only need to reinvent our food business but also expand our FM services into the workplace, always keeping people and care at the center of everything we do. So now let me now hand over to Aurélien who will explain what we're doing in Benefits & Rewards business.

Thank you, Sunil, and hello, everyone. My objective today is to explain how we've fully transformed Benefits & Rewards Services over the past 3 years into a digital business. And this has allowed us to ensure business continuity with our client, but also it prepared us for growth and new opportunities going forward. Our goal for the next 3 years is to reinforce our leadership position as #1 or 2 in each of our employee benefits market. But before I go into the detail, let me set all this into context. Our BRS activity, and particularly, our employee benefits core business that represent 80% of our total revenue have shown good resilience through the crisis, even if we were impacted mainly because of temporary unemployment. Over the last quarter, our business volume growth showed a very good recovery to reach minus 4%, and we saw an encouraging positive trend in September. This resilience can be explained by 3 main reasons. First, our clients want and need our product. They have continued to offer benefits to their employees wherever they work. Benefits like meal or food cards are no longer considered discretionary expenses, but more a way to address critical basic needs in addition to being tax efficient. Today, these are must-haves for an organization as well as for public authorities, who have used them for COVID-19-related social programs. Secondly, we are benefiting from our wide geographical spread. Across the 34 countries in which we operate, the situations differ, and governments have been taking multiple COVID measures that impact our clients and merchants differently. That allows us to better mitigate the consequences of the crisis. Thirdly, our digital transformation helped us to quickly adapt our products to the COVID crisis. In fact, all these recent events have confirmed and accelerated the trends on which our transformation strategy and our products were funded. So how did we transform our business, creating the platform for future growth? First, after a slightly slower start, we fully embraced the digitization alongside best-in-class providers. And I'm very pleased to share that we are now 86% digital compared to 73% 2 years ago. This fast move is much more than a response to the market trend. It's also about entering a new era of opportunities to develop new products as well as modernizing preexisting ones. Over the past few years, we invested up to 9% of our revenues in technology and data to digitize our consumers' journey, and therefore, to provide them a seamless customer experience. For that, we developed our own mobile payment, our own contactless payment and app-to-app payment solution, which have now already been deployed in 24 countries. We entered into a strategic partnership with Zeta, a leading and digital native payment platform. Working with Zeta has enabled us to develop a unique digital and scalable platform that strongly improves the robustness and the user centricity of our products. We have also invested to capitalize on the data we have from serving 36 million consumers daily with over 1 billion digital transactions per year. Data is also key to track and measure our performance in real-time, allowing us to be more predictive in our analysis and faster in our decision-making. Thanks to all these digital assets, we are reducing our time to market and improving our product scalability. And for instance, from the first success in India, we've just launched a multi-benefits product in Brazil with a promising start, already 100 contracts signed in the first month, and we are about to roll it out in 3 other markets. Beyond technology, we have enriched the quality of our products to deliver personalized employee experience at work and beyond. And taking advantage of the digital ecosystem that we built, we have already integrated over 70 partnerships with e-commerce stores and meal and grocery delivery platforms. We saw a 30% increase in deliveries since July. And every day, more than 120,000 deliveries are done through these partners. Our consumers are asking for more choice, which we can address with our new digital products, like the multi-benefits platform that I mentioned earlier. These kinds of products provides the client with more flexibility to adapt to different work situations, could be at home or at the office. And on this work-from-home topic, by leveraging our existing digital products, we were able to quickly respond to our On-site Services client, looking for a meal solution for their employees who, in the same week, would work in different places. As Sunil mentioned, we already have some concrete successes with some first contracts signed. And last but not least, we have also been investing in our people. Switching to digital company means that we had to accompany our team along this journey with training on agile method as well as onboarding new talent. It's a major shift in our way of thinking and in our way of working. And today, our team is ready to drive it. Thanks to this achievement, and despite the lack of visibility, we remain ambitious. Our goal is to reinforce our market share by focusing on 3 key levers: First, our client retention, with a target to reach 95% in fiscal year '21 versus 94% in fiscal year '20. We know that the pandemic is likely to cause the market to contract. We know we need to stay very close to our 0.5 million clients, large and small. We are obsessed with the user experience, challenging ourselves to identify, and progressively, solve for client and consumer pain points through innovation and data. And because our products are relying on our digital platform that is scalable by design, we are cost effective and we can keep a competitive price. Secondly, our ability to win new clients remain critical. So we are continuing to grow our share of SMEs. In spite of the current crisis, we have opportunities and leads still coming in every day, and thanks to our digital marketing investments. We are moving fast on our joint On-site and BRS solutions. As Sylvia mentioned, this work-from-home joint offers are a real differentiator and a future source of growth for Sodexo. And our third lever is around delivering extra value for our 1.3 million merchant partner, who play a key role in our ecosystem. In this time, with the smallest ones, mainly restaurants, are seriously hit by the crisis, we want to stand by their side and to support them. That's why we have several initiatives to reduce their costs, such as the use of the credit card payment and to increase their revenues via our digital platform. So now what is the outlook? Our total employee benefits market estimated at approximately EUR 430 billion pre-COVID will remain significant. Being the #1 player in 17 of our markets, we know that there is a good demand for our products and that we are well placed to meet the flexible working format. We believe the opportunities lie in increasing our market penetration and offering innovative, flexible and user-centric solution. To secure and grow our position, we'll continue to invest in OpEx and in CapEx in technology this year at around 20% of the revenue. We are also reviewing our priorities, improving our efficiency and optimizing our cost to help going back to our pre-COVID level margin. In conclusion, I would say that we are ready with the right combination of state-of-the-art technology, talent and agile mindset to make the most of our product and market opportunities. And we expect to get back to a run rate growth of 5% to 10% in revenues and double digit in operating profit once the crisis is over. Thank you, and I now hand over to Sarosh.